Asian equity markets are mixed as investors digest the decidedly less dovish rhetoric from Fed officials at Jackson Hole symposium on Friday. Fed chair Yellen got the ball rolling with remarks that the case for rate hike has strengthened in recent months as economy is nearing FOMC targets on employment and inflation. While US stocks initially bounced on the comments, Fed vice chairman Fischer then implied that 2 rate hikes within the next 3 meetings, starting with September, is not entirely out of question. Those comments produced some selling late in the US session as greenback firmed and policy expectations were recalibrated. Fixed income markets now see a 33% chance of a September hike vs 21% before Friday's developments, while the outlook for 1 hike by the end of year rose to 60% from 53%. Nikkei225 is thus rising sharply on weaker JPY, while EM and commodity dependent indices and sectors are under pressure from stronger dollar and higher borrowing costs. In FX, USD/JPY tested a 2-week high of 102.20, AUD/USD fell to 4-week low below 0.7550, and gold pared its recent gains below 1,325.
- Over the weekend, there were other Jackson Hole speakers - BOJ Gov Kuroda reiterated that there is ample space for additional policy easing in order to achieve inflation target, while ECB's Coeure cheered ECB's negative rates and asset purchases as "very effective" at supporting growth and inflation. Note that Fed's Bullard and Lockhart also spoke early on Friday with clear consideration of a hike sometime this year - perhaps as soon as the Sept meeting.
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Keep an eye on :
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